Tax breaks for oil companies?

Times must be tough for the trillion dollar global oil industry that yesterday got what they wanted in Parliament and received another extension to their multi-million dollar tax break. What’s next? Community bake sales for deep sea drilling rigs?

Kiwi companies and workers have to pay tax but not offshore oil companies. It defies economic logic that one of the most profitable industries in the world is getting tax breaks from our Government.

WWF estimates the cost of this extended tax break to be worth around $5m a year and when you add it to the $40m of other fossil fuel tax breaks, and $25m of free seismic surveys, the oil industry is getting a very, very good deal from the taxpayer.

Interestingly, Treasury opposes this tax break extension as does the OECD. The latest OECD country report says, “tax concessions distort investment decisions in favour of fossil fuel production over more sustainable sources of growth and counteract New Zealand’s efforts to address global climate change and should thus be discontinued.” Treasury opposes the exemption on the grounds of it setting an unwanted precedent.

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7 thoughts on “Tax breaks for oil companies?”

Oh for goodness sake. This is just alignment with international double-taxation agreements. If a rig operator comes to New Zealand to do work, and they remain here for longer than 6 months, without this legislation, they would have to pay tax twice – once in New Zealand and again where they are domiciled. Without this legislation, they would (and did) leave after 179 days. Which was a problem if they were in the middle of drilling a well, and meant that companies here would have to pay mobilization costs twice to get them back again (at about $20 million a time). That is if they could even attract drilling companies here for a short campaign far from anywhere. Note that it does not apply to support vessels or crew etc. but then again, it is another example of Gareth’s ideological hatred getting in the way of commercial sense.

Just like he claims “free seismic” is a subsidy, and conveniently ignores that fact that the government gets probably 10 times or more “free seismic” from the oil companies under the Crown Minerals Act, and that this seismic has other uses than just oil exploration – things. Like seabed mapping and picking up fault lines (which were recently used for a good tsunami threat assessment study on the west coast).

Given this government, and previous Labour governments, have been prepared to give subsidies to off shore oil rigs because of ‘potential future reveunes’ where does a small but growing business apply for a slice of this pie? I was taking to my butcher at the local shops. He’s a young fella who’s just taken over the business. He wants to expand and employ more people. Given the quality of his bar-b-que steaks he’s likely to succeed. But does he get a tax break like the oil companies? Not on your nelly. Personally I know who I’d like to see the government subsidise, and it’s not an offshore dominated industry that puts our environmental reputation at risk.

The debate surrounding the introduction of this provision, and, in particular the late, great, Rod Donald’s contributions, all the way back from the first reading of the Taxation (Base Maintenance and Miscellaneous Provisions) Bill of 2005 are a great bit of history. Thanks to Hansard, we can enjoy it all over again :link:.

Anyone know the total tax take from oil and gas based products? Strikes me it’s in the hundreds of millions of dollars, and when you add to that royalties from local extraction it probably makes $5 million look like chump change. We do get the other side of the story too, whereby NZ tax payers who work on oil rigs etc, overseas pay taxes here in NZ on their global earnings.